April 5, 2022

  • Germany ok with Russia sanctions, but not on gas
  • RBA leaves rates unchanged, outlook hawkish
  • US dollar opens softer, AUD outperforms

FX change at a glance: 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2455-59, overnight range-1.2438-1.2491, close 1.2488

USDCAD traded with a negative bias yesterday and continued to do so overnight, helped by a bounce in AUDUSD, firm oil prices and the positive Wall Street close.

The Bank of Canada quarterly business Outlook Survey and Survey of Consumer Expectations released yesterday highlighted inflation was a major concern.  Businesses expect strengthening demand with some expecting significant increases in sales.  Firms also expect to pay more for workers.  The surveys’ were taken before Russia invaded Ukraine, but the results suggest the BoC will hike rates 0.50% at tomorrows meeting.

Oil prices inched higher due to a crescendo of calls for harsher sanctions on Russia following reports that Putin’s troops raped and murdered civilians. President Biden’s called for a “war crimes” trial. German officials were also upset with Russia’s actions but not enough to ban imports of Russian gas.

WTI oil is trading in the middle of its overnight $103.56/barrel-$105.57/b range.

Canada’s Trade data surplus narrowed from an upwardly revised $3.1 billion in January to $2.66 billion in February.  Imports rose 3.9% and exports rose 2.8%.

USDCAD technical outlook

The USDCAD technicals are bearish while trading below 1.2510, looking for a decisive break below the 1.2440 support area to target 1.2280 then 1.2000. A move above 1.2510 suggest further 1.2440-1.2560 consolidation.

 Interestingly, USDCAD at 1.2500 equals CAD 80 cents to $1.00 US dollar, a level that garners a lot of attentions as both support and resistance.  There is not a good reason for the relationship, but nevertheless, a prolonged stay below will reinforce the strength of resistance at 1.2500.

For today, USDCAD support is at 1.2420 and 1.2360  Resistance is at 1.2490 and 1.2530.  Today’s Range 1.2410-1.2490

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

It’s kind of a nothing day for financial markets.  The economic data is second-tier, and the Russia/Ukraine war dominates the news feeds.

EU and US are outraged over Russia’s actions in Ukraine and are threatening a slew of new sanctions.  However, German officials refuse to entertain any energy boycotts due to its reliance on Russian energy.  Putin just smiles, encourages diplomacy, and continues his invasion.

North Korea’s resident nut-bar, Kim Jung-un, perhaps dismayed with all the attention that Putin is receiving, added his voice to the nuclear dialogue.  He said if South Korea chooses confrontation, nuclear forces will carry out their mission.

Asia equity markets were rather quiet as China, Hong Kong, and Taiwan markets were on holiday.  Japan’s Nikkei closed with a modest 0.10% gain while Australia’s ASX 200 rose 0.19%.

US February Trade data was close to unchanged posting a deficit of $89.19 billion.

European bourses are flat to negative with Germany’s DAX index down 0.49%.  DJIA and S&P 500 futures are slightly lower.  WTI oil rose while gold dipped modestly.  The 10-year US Treasury yield is 2.47%.

EURUSD ended its March-long uptrend with the move below 1.1000 yesterday and prices traded with a negative bias in a 1.0957-1.0988 range overnight.  Euro area composite PMI rose 54.9 (forecast 54.5) and Services PMI rose 55.6 (forecast 54.8), but the data was ignored.  ECB policymaker Klaas Knot said the ECB should act in the face of high inflation but do so in a gradual manner.  EURUSD is bearish with a break below 1.0930, targeting 1.0850.

GBPUSD chopped about in a 1.3108-1.3143 band supported by EURGBP selling.  UK Services PMI was 62.6 compared to forecasts of 61.0.  A break above 1.3160 targets 1.3350.

USDJPY is at the top of its 12238-122.99 range, supported by higher US treasury yields.  Japanese officials continue to make noises about the yen’s value, but their comments were ignored.

AUDUSD surged from 0.7538 to 0.7638 after the RBA lost it’s “patience.”  The central bank removed patient from the wording of the statement, and they no longer plan to “maintain highly supportive monetary conditions.”  Australian banks are forecasting multiple rate hikes in 2022.

The US ISM Services index (forecast 58) and Fed-speak from Kashkari, Williams, and Brainard are ahead.

Chart of the Day EURUSD 4 hour

Source: Saxo Bank

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3509, closed Ming Festival

Shanghai Shenzhen CSI 300 closed Ming Festival